Stay on Sebi order saved RPL debut

Partha Sinha / TNN / May 9, 2006, 00:35 IST

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The AP HC stay on the April 27 order by Sebi has ensured the timely listing of Reliance Petroleum Ltd shares on the stock exchanges.

MUMBAI: The Andhra Pradesh HC stay on the April 27 order by Securities and Exchange Board of India's (Sebi) has ensured the timely listing of Reliance Petroleum Ltd (RPL) shares on the stock exchanges.
Had the market regulator's decision of banning some of the largest brokers and depository participants (DPs) stood, it would have forced a large number of investors to change their DP.This, in turn, could have delayed the allotment and the subsequent listing of RPL shares, market sources said.
On April 27, Sebi had put a complete ban on two DPs - Karvy and Pratik - and asked investors with demat accounts with them to shift to other DPs within two weeks.
Considering that the Sebi order came late on April 27, the stipulated 15-day period would have ended on May 12; tentatively the day on which Reliance Petroleum would have debuted on the bourses. It could even list a day earlier, on May 11.

Now consider the situation from the other side - the investors and the DPs - under the Sebi order. Even with the most efficient service standards, usually it takes about 4-5 working days for any DP to open a new account.
However, to have a new demat account, from April 1 this year, every investor needs a permanent account number (PAN) from the Income Tax Department first.
To get a PAN would have also taken 4-5 working days. So together it would have taken at least 8-10 days to open a new demat account. Now add to this the two Sundays and the May 1 holiday that came in between: at least 13 days.

The thirteenth day beginning April 28 would be May 10, leaving the merchant bankers and the registrars to the RPL issue just one day to transfer held up shares in the new demat accounts and then one more day to get RPL listed on May 12.
Top officials at registrars, DPs and merchant banking outfits say such a timeline would have been almost an impossible task to accomplish given the number of applicants and allottees.
Had the HC not stayed the order, there was every possibility that a large number of RPL investors would have been without shares on the day of allotment and probably on the day of listing now being decided, a top official with a share registrar said.
In effect the most successful IPO in the history of Indian market would have run into some rough weather. "There could have been chaos in the market," the official said.
In RPL's maiden public offer that created a new record for IPOs in India and around the globe the book size was a record $32 billion (Rs 1.42 lakh crore) from about 21 lakh investors.
The issue was oversubscribed over 50 times: investor demand was for 2,226 crore RPL shares while the issue size was just 45 crore shares.

About the Author

Partha Sinha

Partha, senior assistant editor (markets) at The Times of India, Mumbai, covers the financial markets, mainly the stock market, mutual funds, banking and insurance sectors. He is a sports enthusiast. His hobby is philately.

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